Tax loopholes for the rich we don't think about

[top gun]

Hello everybody...

This case was in our local newspaper today and is a perfect example of just one of the many, many tax loopholes for the rich that are never taken into consideration when the discussion of taxes is discussed.

You've all heard me talk about tax shelters and other ways to get around paying in you're taxes that really deducts from what people of wealth are actually paying in compared to what their tax bracket says they pay.

Here's one example I think everyone will see as ridiculous. And remember every dollar not paid in is a dollar more someone else has to pay to make up for.

Kirk Herbstreit famous OSU quarterback turned ESPN commentator who lives right here in Upper Arlington an extremely wealthy Columbus suburb is in a battle with the IRS. Seems he and his wife bought a home in Upper Arlington. Had the fire department burn it down for training purposes so they could build a new home on the property and took a $330,000 tax deduction for it.

And actually this is something that has been allowed as a deduction in many cases. The only thing that really tripped this up was the $330,000 deduction is said to be the whole properties value including the land... they still have the land and a big new mansion on it as well.

Herbstreit (who I've personally met, we used to manage some of his properties and is a great guy by the way) when audited he went ahead and paid the $134,604 in unpaid back taxes and interest and if trying now to get an adjusted amount back presumably for the house only deduction.

But what this highlights is THIS IS A RIDICULOUS DEDUCTION TO BE ALLOWED IN THE FIRST PLACE. There are old abandon homes and buildings all over the city that the city has condemned and wants raised (demolished) ... will have to pay out of tax dollars to be raised... any Fire Dept. can burn most these down just for the asking... and we're giving millionaires all over America full home value minus land value to burn down old mansions to rebuild knew mansions.

They're getting their personal demolition costs provided for FREE.

This is the tax code for the rich that you and I seldom get to see.

These ridiculous loopholes so obviously should have been be plugged years ago... or more reasonably never have been allowed to be started in the first place. I look forward to your opinions.

 

[dahermit]

My favorite is the reported tax break the wealthy get for investing in foreign industry. Gosh, I wonder how that effects our economy.

 

[top gun]

My favorite is the reported tax break the wealthy get for investing in foreign industry. Gosh, I wonder how that effects our economy.

No kidding you know that can't be good.

Corporations (the wealthy) lobby for rules and give campaign contributions so that they are allowed to pay less taxes through tax shelters & tax breaks. Then that burden is shifted to the middle class. Then because that becomes too much for the middle class to bear the taxes get raised on the wealthiest and they in turn look for more loopholes so they can get out of more taxes.

Can we all say... CIRCULAR FIRING SQUAD!

 

[BigRob]

Will someone please tell me what tax rate corporations in the United States pay? Then compare that to other developed nations around the world?

 

[top gun]

Will someone please tell me what tax rate corporations in the United States pay? Then compare that to other developed nations around the world?

I can tell you it's higher in the US if that's what you want to know Rob.

But that doesn't tell the whole story. In some countries healthcare is free. In many others the living wage is like pennies on the dollar compared to the US.

So there's more to consider than just tax rate. And that's my whole point with this glaring example. There are literally hundreds of tax breaks and tax shelters like this that the wealth have to use.

So when you look at a high end tax rate and just figure out what that income means in tax dollars... it isn't that. After you peel away all the extra tax breaks it whittles it down. And then often they take another large amount and give that to charity to avoid paying that in taxes. Not that that isn't OK to do but my point is that "TAX BRACKET" you see isn't the real amount of money going to the government... not even close.

That's all I'm pointing out and I think this is a great example. Buy a mansion. Have the fire department burn it down (in essence doing you demo work for free). Then build a new mansion on the same plot of land.

Deducted from taxable income the whole amount $330,000 as an extra tax write off which equaled $134,604 minus whatever the interest was in real money. That's what they would have saved on just this one tax break.

$134K cash windfall for letting someone burn down your house so you don't have to pay to demo it... pretty darn good deal huh?

That's a honkin' huge write off and they still get to keep the land. These are the things in our tax code that need to be immediately removed.

 

[BigRob]

I can tell you it's higher in the US if that's what you want to know Rob.

Indeed.

But that doesn't tell the whole story. In some countries healthcare is free. In many others the living wage is like pennies on the dollar compared to the US.

So countries in which healthcare is free can have lower corporate tax rates? Yet here in the US, our plan is to tax the rich (aka companies too) at higher rates than our already high rates to pay for it?

So there's more to consider than just tax rate. And that's my whole point with this glaring example. There are literally hundreds of tax breaks and tax shelters like this that the wealth have to use.

I am open to reforming the tax system, if we make it fair.

So when you look at a high end tax rate and just figure out what that income means in tax dollars... it isn't that. After you peel away all the extra tax breaks it whittles it down. And then often they take another large amount and give that to charity to avoid paying that in taxes. Not that that isn't OK to do but my point is that "TAX BRACKET" you see isn't the real amount of money going to the government... not even close.

I can tell you that rich people pay boatloads more in taxes than anyone else. Even with write-offs and the like.

That's all I'm pointing out and I think this is a great example. Buy a mansion. Have the fire department burn it down (in essence doing you demo work for free). Then build a new mansion on the same plot of land.

Deducted from taxable income the whole amount $330,000 as an extra tax write off which equaled $134,604 minus whatever the interest was in real money. That's what they would have saved on just this one tax break.

I would not say many people have houses to burn down to take tax write offs, not even rich people.

$134K cash windfall for letting someone burn down your house so you don't have to pay to demo it... pretty darn good deal huh?

That's a honkin' huge write off and they still get to keep the land. These are the things in our tax code that need to be immediately removed.

I am open to tax code reform, assuming we don't penalize people for being successful.

 

[top gun]

So countries in which healthcare is free can have lower corporate tax rates? Yet here in the US, our plan is to tax the rich (aka companies too) at higher rates than our already high rates to pay for it?

I'm saying it's not a level playing field. When you look at the total combination of things they can have a lower corporate tax rate.

It costs a lot more to live in America than it does in say China, India or South Korea. Everything cost much less in these places. That being the case their governments need less revenue to fund their programs... because they are in themselves less much expensive.

I am open to reforming the tax system, if we make it fair.

The fairest thing I've seen that there is, that still brings in the needed amount of revenue is the progressive tax system.

I can tell you that rich people pay boatloads more in taxes than anyone else. Even with write-offs and the like.

Dollar wise this is true... they have much more income so the dollar amount of their taxes is much more as well. Percentage wise it's much closer though. All I'm pointing out is that when you see a tax rate for the higher income brackets the truth is they almost never (I'm going to say never) actually pay that percentage in taxes. That's just their starting off point.

I would not say many people have houses to burn down to take tax write offs, not even rich people.

I'm just pointing this out as ONE of many I'll call them "tricks" but they are actually tax shelters & tax write offs that the rich have at their disposal. Remember the super rich Leona Helmsley's line... only little people pay taxes? While not true it does highlight that the rich do know how to circumvent the tax code and get some very good deals on their taxes.

I am open to tax code reform, assuming we don't penalize people for being successful.

And that's a reasonable thing to want. You do have to spread the burden out and I think that's sort of the idea of raising taxes up in the highest brackets and trying not to thwart people in the middle, upper middle and even lower upper class as much as possible. The reality is if you're making a million per year you've already made it big. Once you get to that point you have enough ducks in a row. A couple percentage points increase in your tax rate isn't going to affect your life in any way.

There is a price to be paid for all that we've developed over the years. If we had the same number of people as 200 years ago and didn't mind dirt roads, barely any healthcare, military costs that were muskets and cannons, schools that were very minimal and even nonexistent in places, there were enough churches to people to really address helping the poor, most people grew much of their own food and a long life span was 50...

things would be a lot cheaper.